Ford Loses $284 Million in Q3 2005

21 October 2005

Ford has reported a net loss for the third quarter of $284 million, Ford’s first loss since Q4 2003. Excluding special items, it lost $191 million on continuing operations. These results compare with net income of $266 million in the third quarter of 2004.

Of that automotive loss, $1.070 billion was in the Americas. Ford’s Asia Pacific and Africa operations netted $133 million, although the company continued to post losses in Europe and with the Premier Auto Group of $163 million.

Despite the third-quarter net loss, Ford remains in the black for the year as a whole, while GM has lost about $3.8 billion through the first nine months of the year.

As our results indicate, we face many challenges in this competitive and difficult environment. We have demonstrated throughout the year that we will continue to take the actions necessary to return our core business to sustainable profitability. We understand the issues, our priorities, and have the right team in place to get the job done.

—Chairman and CEO Bill Ford

Actions taken in the third quarter designed to improve the financial situation, according to Ford, include:

Finalization of the Visteon agreement.

An agreement to sell The Hertz Corporation.

The introduction of new supply base consolidation initiative

Announcement of the Company’s innovation initiative, including a tenfold increase in annual hybrid vehicle production by 2010.

The launch of Ford Fusion, Mercury Milan and Lincoln Zephyr in North America. Fusion and Milan are destined to be Ford’s first hybrid sedans. (Earlier post.)

Premier Automotive Group reveal of Volvo C70 and Jaguar XK.

Roll-out of Ford Focus in Asia Pacific.

Ford will announce a restructurin program in January for its North American operations that will include, according to Bill Ford, “significant plant closings where facilities don’t fit our strategy moving forward.”

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Comments

Why separate the "automotive total" from the finances? Why not just have "total"?

At first glance financing and automobiles aren't related. But, we all know that the financing is used as a pricing tool to sell cars. Lower interest spurs more sales, and higher interest is overcome by lower prices.

This kinda counters other reports that came in saying how the "employee pricing" boosted sales. Which is correct?

I guess Ford having to swallow all the Excursions, Expeditions, and F-350 that it built and are having trouble now selling contribute to that. Lets hope Ford follows Toyota and Honda's lead in building more efficient vehicles like the Focus, hybrid Escape, etc. I would hope GM could follow their lead also, but feel GM is on a path to self destruction, and is incapable of being saved.

Well, ultimately everything *is* rolled together for the net income/loss. Automotive and finances. But taking a look at them separately is the opposite of disingenuous. :-) It gives you a better understanding of what's working and what's not. There's a big difference between saying "the company lost $191 million on operations" and "Operations in the Americas lost $1.1 billion."

About 25% of that financial services revenue was represented by Hertz, btw, which the company has since agreed to sell.

I disagree, due to the correlations I mentioned earlier. Because the revenue of those two are clearly negatively correlated*. Seperating the two gives the false impression that the two categories are independant entities. If Ford stops selling cars, it's auto loss goes to $0 -- but their finance revenue would also go to $0, since they'd have no cars to finance.

It's a bit like giving the razor away and profiting on the blades. You'd see huge losses on razors but profits on blades -- however, they're clearly related and separating them doesn't really provide any insight; rather, it provides a false clarity.

* Fixing price, if they drop interest to 0%, they sell more cars. Heck, if they'd drop interest to negative, they'd sell even more. If they yank up interest, they'll sell fewer cars. Therefore, the level of interest can severely impact the auto revenue in a negatively correlated fashion.